The broker of record letter is a simple document that establishes the written intent of an aircraft owner or commercial operator for the insurance underwriters to deal with a specific broker. Unfortunately this simple document is misunderstood by many clients and misused by some brokers.
Because the aviation insurance industry is so small, all aviation insurance companies and underwriters except one use the broker system rather than captive agents. In the auto insurance industry it is common for an agent to represent only one company, like State Farm or Allstate. Other companies like Geico market directly to the consumer. When you call an agent of one of these companies, you know what market you are talking to. It is easy to understand that when you call another agent from the same company, you are not likely to get a different quote and/or be referred back to the original agent. Quality aviation specialty brokers have access to all markets except the single “direct writing” company that specializes only in light piston owner flown aircraft.
There is seldom a week that goes by when a prospect calls for a quote without realizing that he can shop the entire aviation insurance market with one or two phone calls or emails. All too often a broker will shop the marketplace for a new prospect only to find there are several other brokers who have been requested to shop the market as well, making his efforts fruitless. This new or uninitiated aviation insurance shopper usually doesn’t have an established relationship with a broker and doesn’t understand the nature of the aviation insurance market. He wants what everyone wants, the best coverage at the best price. Nothing wrong with that!
Who is your broker of record? A broker of record is the agent who services your current aviation account with your current insurance company. On a new purchase or a renewal any broker can have free access to all the other markets except this one. When you call a broker for a quote and give him all the required information to get that quote, he will automatically shop all markets available to him. Your current insurance company will advise him they are “involved” and cannot offer a competing quote. If this broker is the first to contact the underwriter with a valid quote request for this new or renewal period, he then becomes the established broker of record for that market. All other brokers with subsequent quote requests will be informed of this “involvement” and be denied a quote. The only time there is not an established broker of record in at least one market is if this is a new purchase by a new owner and/or named insured without any previous contact to the underwriters.
When is a broker of record letter required? Remember, the underwriters don’t care which broker you use. But, they will deal only with your current broker, the first broker with a valid quote request, or any broker you specify in writing. Because of efficiency and time constraints, they only want to provide one quote for one risk. That is not unreasonable. Nor is it anti-competitive. A key point to remember: the underwriters of the several companies establish the pricing and terms of each quote, not the broker. A broker of record letter is needed to give a specific broker access to one market, several markets or all markets. The successful broker will not take on a new client without first establishing what markets the client wishes him to have if not all markets.
Two ways to view a broker of record letter–Look at a broker of record letter two ways: hiring a new broker, or firing an old one.
In firing an old broker, you are usually preventing him from obtaining new or renewal quotes including your current insurance carrier. I encourage my new clients to inform the old broker of their decision prior to initiating a broker of record letter.
In hiring a new broker or brokers, you can assign him all markets or just one.
When assigning all markets, you may want to address the broker of record letter “To All Aviation Insurance Underwriters.” When assigning a single market, address the broker of record letter only to that specific underwriter/company.
Broker of Record letter abuse. It is a normal and acceptable practice for a broker to ask for a broker of record letter. Usually, the successful broker will fully explain what the broker of record letter means and why he needs it. He will also give the new prospect the options available to him in the marketplace. It is unfortunate and terribly short sighted, but there are a few brokers who take advantage of a prospect’s lack of understanding of the broker system in the aviation insurance industry. They will press the prospect for a blanket letter to all markets, winning the business by default even when it is clear that the prospect is only initiating a search for a broker he likes.
In the end, the successful broker builds his client base the old fashioned way-he earns their trust and business through superior service and putting the client’s interests first. In turn, he is usually rewarded by the loyalty of his client base. In the end, the client gets the right coverage for best price through a broker he enjoys doing business with.
Don’t be afraid of the broker of record letter. Learn to use it to your advantage.